Strategic Planning
Week 1
Strategic Planning – The ability to come up with effective plans in line with an organization’s
objectives within a particular economic situation. Strategic thinking helps businesses and inviduals to
identify and gaining competitive advantage, perform long planning, set goals and determine priorities,
and identify potential risks and opportunities.
Mintzberg 5 P’s for Strategy
Plan - Consciously intended course of action
- Approach that we adopt – brainstorming
options and planning how to deliver
them.
- PEST / SWOT analysis
Play - Specific maneuver to outwit opponents
- Getting the better of competitors, by
plotting to disrupt, dissuade, discourage,
or otherwise influence them, can be part
of a strategy. This is where strategy can
be a ploy, as well as a plan.
- For example, a grocery chain might
threaten to expand a store, so that a
competitor doesn't move into the same
area; or a telecommunications company
might buy up patents that a competitor
could potentially use to launch a rival
product.
- GAME THEORY
Pattern - Pattern is a stream of actions
- Rather than being an intentional choice,
a consistent and successful way of
doing business can develop into a
strategy.
- CORE COMPETENCE Analysis
Position - Position in relation to the organization’s
environment
- How you decide to position yourself in
the marketplace – how to develop
sustainable competitive advantage
Perspective - The organization’s shared mindset
- patterns of behavior can emerge as
strategy, patterns of thinking will shape
an organization's perspective, and the
things that it is able to do wFor
instance, an organization that
encourages risk-taking and innovation
from employees might focus on coming
up with innovative products as the main
thrust behind its strategy.
An intended strategy is the strategy that an organization hopes to execute. Intended strategies are
usually described in detail within an organization’s strategic plan. When a strategic plan is created for
a new venture, it is called a business plan.
An emergent strategy is an unplanned strategy that arises in response to unexpected opportunities and
challenges. Sometimes emergent strategies result in disasters.
Example
- In the mid-1980s, FedEx deviated from its intended strategy’s focus on package delivery to
capitalize on an emerging technology: facsimile (fax) machines.
- Developed a service called ZapMail that involved documents being sent electronically via fax
machines between FedEx offices and then being delivered to customers’ offices.
- Hoped that ZapMail would be a success because it reduced the delivery time of a document
from overnight to just a couple of hours. Unfortunately, ZapMail system had many technical
problems that frustrated customers.
- Even worse, FedEx failed to anticipate that many businesses would simply purchase their
own fax machines. ZapMail was shut down before long
- Lost hundreds of millions of dollars following its failed emergent strategy. In retrospect,
FedEx had made a costly mistake by venturing outside of the domain that was central to its
intended strategy: package delivery.
A realized strategy is the strategy that an organization actually follows. Realized strategies are a
product of a firm’s intended strategy (i.e., what the firm planned to do), the firm’s deliberate strategy
(i.e., the parts of the intended strategy that the firm continues to pursue over time), and its emergent
strategy (i.e., what the firm did in reaction to unexpected opportunities and challenges). In the case of
FedEx, the intended strategy devised by its founder many years ago—fast package delivery via a
centralized hub—remains a primary driver of the firm’s realized strategy.
An intended strategy is the plan at the beginning. A realized strategy is how it worked out at the end.
The two are often different because the intended strategy may be of poor quality, or competitors may
bring pressure that requires changes in strategy. There may be other influences, also, that cause the
strategy as actually implemented to be different from what was originally planned.
Approaches to Strategies
Method A – translation of intent into action // created via a process based on analysis
Method B – more perspective / thought
Porter’s 5 forces model
- Bargaining Power of Suppliers
o This force analyzes how much power a business's supplier has and how much control
it has over the potential to raise its prices, which, in turn, would lower a business's
profitability. In addition, it assesses the number of suppliers available: The fewer
there are, the more power they have. Businesses are in a better position when there
are a multitude of suppliers.
o Supplier power increases when
suppliers are large & few in number,
suitable subsitutes not available,
supplier’s goods are critical to buyer’s marketplace success
suppliers’ products create high switching costs
suppliers have substanial resources & provide a highly differentiated product
suppliers pose a credible threat to intergrate forward into buyers’ industry
- Threat of Substitutes
o This force studies how easy it is for consumers to switch from a business's product or
service to that of a competitor. It looks at the number of competitors, how their prices
and quality compare to the business being examined and how much of a profit those
competitors are earning, which would determine if they can lower their costs even
more. The threat of substitutes is informed by switching costs, both immediate and
long-term, as well as a buyer's inclination to change.
o Threat of substituate products increases when
Buyers face few switching costs
Substitute products’ price is lower
Substitute product’s quality and performance are equal or greater than
existing product
o Function of a substitute :- goods and servces outside a given industry perform the
same or similar functions at a competitive price
o Differentiated industry products are valued by customers reduce this threat
- Threat of New Entrants
o This force considers how easy or difficult it is for competitors to join the marketplace
in the industry being examined. The easier it is for a competitor to join, the greater
the risk of a business's market share being depleted.
o Barriers to entry include government policy, product differentiation, switching costs,
cost disadvantages independent of scale, access to distribution channels, economies
of scale.
- Bargaining Power of Customers
o This force examines the power of the consumer and their effect on pricing and
quality. Consumers have power when there aren't many of them but there are plentiful
sellers, as well as when it is easy for customers to switch from one business's
products or services to another's. Buying power is low when consumers purchase
products in small amounts and the seller's product is very different from any of its
competitors.
o Buyer power increases when
buyers purchase a large portion of an industry’s total output
buyers purchases are a significant portion of seller’s annual revenues
switching costs (to other industry’s products) are low
the industry’s products are undifferentiated or standardised
buyer pose a credible threat to intergrate backward into the seller’s industry
- Competitive Rivalry
o This force examines how intense the competition currently is in the marketplace,
which is determined by the number of existing competitors and what each can do.
Rivalry competition is high when there are just a few businesses equally selling a
product or service, when the industry is growing and when consumers can easily
switch to a competitor's offering for little cost. When rivalry competition is high,
advertising and price wars can ensue, which can hurt a business's bottom line.
o Commom rivalry dimensions :- price // service after sale // innovation
o Industry rivalry intensifies with numerous competitors, slow industry growth, high
fixed costs, lack of differentiation opportunities or low switching costs, high strategic
stakes, and high exit barriers.
Porter’s Diamond explains the factors that can drive competitive advantage for one national market or
economy over another.
- Factor conditions
o This is the situation in a country relating to production factors like knowledge and
infrastructure. These are relevant factors for competitiveness in particular industries.
These factors can be grouped into material resources- human resources (labour costs,
qualifications and commitment) – knowledge resources and infrastructure. But they
also include factors like quality of research or liquidity on stock markets and natural
resources like climate, minerals, oil and these could be reasons for creating an
international competitive position.
- Demand conditions
o There always exists an interaction between economies of scale, transportation costs
and the size of the home market. If a producer can realize sufficient economies of
scale, this will offer advantages to other companies to service the market from a
single location.
- Related and supporting industries
o The success of a market also depends on the presence of suppliers and related
industries within a region. Competitive suppliers reinforce innovation and
internationalization. Besides suppliers, related organizations are of importance too. If
an organization is successful this could be beneficial for related or supporting
organizations. They can benefit from each other’s know-how and encourage each
other by producing complementary products.
- Industry strategy, structure and rivalry
o This factor is related to the way in which an organization is organized and managed,
its corporate objectives and the measure of rivalry within its own organizational
culture.
o It focuses on the conditions in a country that determine where a company will be
established.
o Domestic rivalry and the continuous search for competitive advantage within a nation
can help organizations achieve advantages on an international scale.
o Factors like Government and Political events that influence competition between
companies.
Week 2
PESTEL Analysis for Macro Environment
Political Factors
These are all about how and to what degree a government intervenes in the economy. This can include
– government policy, political stability or instability in overseas markets, foreign trade policy, tax
policy, labour law, environmental law, trade restrictions and so on. These factors impact organisations
and how they do business. Organisations need to be able to respond to the current and anticipated
future legislation, and adjust their marketing policy accordingly.
Economic Factors
Factors include – economic growth, interest rates, exchange rates, inflation, disposable income of
consumers and businesses and so on. These factors can be further broken down into macro-
economical and micro-economical factors. Macro-economical factors deal with the management of
demand in any given economy. Governments use interest rate control, taxation policy and government
expenditure as their main mechanisms they use for this.
Social Cultural Factors
Areas that involve the shared belief and attitudes of the population. These factors include – population
growth, age distribution, health consciousness, career attitudes and so on. These factors are of
particular interest as they have a direct effect on how marketers understand customers and what drives
them.
Technological Factors
We all know how fast the technological landscape changes and how this impacts the way we market
our products. Technological factors affect marketing and the management thereof in three distinct
ways:
- New ways of producing goods and services
- New ways of distributing goods and services
- New ways of communicating with target markets
Environmental Factors
Important due to the increasing scarcity of raw materials, pollution targets, doing business as an
ethical and sustainable company, carbon footprint targets set by governments. These are just some of
the issues marketers are facing within this factor. More and more consumers are demanding that the
products they buy are sourced ethically, and if possible, from a sustainable source.
Legal Factors
Legal factors include - health and safety, equal opportunities, advertising standards, consumer rights
and laws, product labelling and product safety. It is clear that companies need to know what is and
what is not legal in order to trade successfully. If an organization trades globally this becomes a very
tricky area to get right as each country has its own set of rules and regulations.
Understand Monopoly, Monopolistic, Oligopoly, & Perfect Competitive – Strategic Implications
Strategic Groups – a set of firms emphasizing similar strategic dimensions and using similar
strategies. Greater competition within a strategic group than between strategic groups ; similar market
positions, products, & strategic actions.
Value
- A product’s performance characteristics & attributes for which customers are willing to pay.
- Point of reference : customer // competitor centered comparisons // vertical relationships
within the industry.
Value Chain Analysis - Strategy that involves the creation of a systematic set of steps or activities that
incrementally add value to the goods or services produced. With this approach, there is an
understanding that each and every activity involved adds a little more value to the finished product.
Week 4
Innovation
a) Sustaining - comes from listening to the needs of customers in the existing market and
creating products that satisfy their predicted needs for the future. (when the race entails
making better products that can be sold for more money to attract customers by exploiting
market presence, the incumbents will prevail) Example : Uber vs Taxi / Google vs Bing
b) Disruptive - creates new markets separate to the mainstream; markets that are unknowable at
the time of the technology’s conception. (challenge to commercialize a simpler and more
convenient product that sells for less money and appeals to a new/unattractive customer set,
the entrants are likely to beat incumbents)
- Two types of disruption :
o low end – are there customers who would be willing to pay for a less good product
for a cheaper price? Ex : Walmart
o new market disruption – is there a large population of people who have not had the
money, skill or equipment to do this for themselves? Ex : Xerox vs Canon /
Smartphones
How to Look for and Manage these disruptions ?
- Three Horizons Framework that provides a structure for companies to assess potential
opportunities for growth without neglecting performance in the present.
1) Horizon one represents those core businesses most readily identified with the company name
and those that provide the greatest profits and cash flow. Here the focus is on improving
performance to maximize the remaining value.
2) Horizon two encompasses emerging opportunities, including rising entrepreneurial ventures
likely to generate substantial profits in the future but that could require considerable
investment.
3) Horizon three contains ideas for profitable growth down the road—for instance, small
ventures such as research projects, pilot programs, or minority stakes in new businesses.
Week 5 & 6
Futures Cone, and its concept of ‘P’ futures (Possible, Plausible, Probable, and Preferred)
Strategic intent : envisions a desired position and establishes the criterion the organization will use to
chart its progress, it incorporates values and establishes direction. It has the property of being clear
about ends, flexible as to means and leaves room for improvisation. (Vision & Mission)
Vision : a long term position or place to be achieved, served as a focal point of effect and catalyst for
team spirit.
Mission : enduring statement of purpose ; “who are we and what we do”, and describes an
organization’s core purpose.
SWOT Analysis : aim is to create a strategy, strategic intent or set of strategies that built strengths,
minimize weakness, capitalize opportunities and avoid threats all at the same time.
Resource Based View of the Firm (VRIO Framework)
V = value, R = rareness, I = imitability, O = organizationally exploited
Two Key Assumptions
1) Resource heterogeneity – each firm has unique combination of resources and capabilities such
that no two firms are identical twins
2) Resource immobility – resources and capabilities unique to one firm cannot easily migrate to
competing firms.
VRIO Framework builds firms resources and capabilities strengths before beginning the search for the
most attractive industry or segment. Imitation is not a successful strategy – creating new ways of
adding value forces competitors to play the best performing firm’s game. Competitive advantage does
not last forever, and strategic foresight is necessary to anticipate needs and move early to build
resources and capabilities for future competition.
Week 7
Cost leadership strategy : An integrated set of actions taken to produce goods or services with features
that are acceptable to customers at the lowest cost, relative to that of competitors with features that are
acceptable to customers.
Differentiation strategy : aims to create and exploit an element of uniqueness about a product or
service. It is a set of integrated actions taken to product goods or services (at an acceptable cost) that
customers perceive to be different in ways that are important to them.
Focused strategy : An integrated set of actions taken to produce goods and services that serve the
needs of a particular competitive segment.
Week 8
Diversification Strategy : refers to a company’s decision to expand its operations by adding new
products and services, markets or stages of production to existing business. Purpose is to allow the
company to enter lines of business that are different from current operations.
- Increases company market power
- 4 mechanisms
o Predatory pricing
o Bundling of products together
o Reciprocal dealing (leveraging market share across its businesses)
o Mutual forbearance when conglomerates faces each other
- Diversification results in a reduction of investment risk
- Disadvantages of the extra layers of management increase costs, accounting disclosure, and
conglomerates can trade at a discount to the overall individual value of their businesses
because investors can achieve diversification on their own simply by purchasing multiple
stocks.
Retrenchment or Turnaround activities
1) Restructuring
2) Divestment
3) Liquidation / bankruptcy
4) Tie to a large company
